Chinese Government Demands Fair Steel Prices

China warned March 15 it was prepared to intervene in talks over iron ore prices as it accused global suppliers of securing "huge and unreasonable profits" through their monopoly businesses. The Ministry of Commerce and China's planning body, the National Development and Reform Commission, released a joint statement saying the government would ensure Chinese steel companies received a fair price this year.

"Some multinational companies use their monopoly status in iron ore international trade to obtain high and unreasonable monopoly profits," the statement said.

Chinese steel companies are currently locked in price negotiations with the world's three biggest iron ore exporters -- Australia's Rio Tinto, Anglo-Australian firm BHP Billiton and Brazil's Companhia Vale do Rio Doc. Booming Asian demand meant Chinese iron and steel companies were forced to accept a 71.5% price hike from suppliers last year. Analysts have said China may only agree to a rise of 10% this year.

"Not only does that hurt iron importing countries, including China, it is also going against the principle of fair trade," the statement said. Restrictions on prices and quantities of imported ore would ensure a more "healthy" development of the industry, the Ministry of Commerce said, without elaborating on the price and potential import caps.

Shanghai Baosteel, the nation's largest steel maker, is the only Chinese enterprise in talks with the foreign suppliers this year. All domestic mills and iron ore traders will accept the prices Baosteel agrees upon. The price agreed will be applicable from April 1.

China's price negotiations are important on a global scale because they help in setting prices around the world. In a report to clients last week Goldman Sachs said China's booming economy would account for 45% of global imports of iron ore this year.

Copyright Agence France-Presse, 2006

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